In the case of Republic of the Philippines vs. Holy Trinity Realty Development Corp., the Supreme Court ruled that the interest earned on expropriation deposits belongs to the property owner, not the government. This decision clarifies that when the government deposits money for expropriation, it is considered immediate payment, and any interest accrued after that constructively belongs to the landowner.

Eminent Domain and Earned Interest: Who Benefits?

This case revolves around the expropriation of land owned by Holy Trinity Realty Development Corporation (HTRDC) for the North Luzon Expressway project. The Toll Regulatory Board (TRB), representing the Republic, deposited an amount equivalent to 100% of the zonal value of the property with Land Bank of the Philippines (LBP) to secure a writ of possession. The core legal question is: who is entitled to the interest earned on this deposited amount during the expropriation proceedings?

The TRB argued that HTRDC was only entitled to the zonal value of the property, citing Republic Act No. 8974 and Rule 67 of the Rules of Court. They claimed that the issue of interest should only be considered during the second stage of expropriation proceedings, when just compensation is determined. HTRDC, on the other hand, asserted its right to the interest earned, arguing that the deposit constituted constructive delivery, making them the owner of the funds and, consequently, the interest.

The Supreme Court distinguished between the procedures under Republic Act No. 8974 and Rule 67. The Court highlighted that R.A. 8974, which governs expropriation for national government infrastructure projects, requires immediate payment to the property owner upon filing the complaint to be entitled to a writ of possession. This is distinct from Rule 67, which only requires an initial deposit. The Court cited Republic v. Gingoyon:

There are at least two crucial differences between the respective procedures under Rep. Act No. 8974 and Rule 67. Under the statute, the Government is required to make immediate payment to the property owner upon the filing of the complaint to be entitled to a writ of possession, whereas in Rule 67, the Government is required only to make an initial deposit with an authorized government depositary.

Building on this distinction, the Court emphasized that the deposit made by TRB was not merely a security but an immediate payment intended to comply with R.A. 8974. This underscores the legislative intent to prioritize landowners’ rights in expropriation cases for national infrastructure projects.

The Court then addressed the issue of ownership and accession. Under Article 440 of the Civil Code, “[t]he ownership of property gives the right by accession to everything which is produced thereby, or which is incorporated or attached thereto, either naturally or artificially.” The Court reasoned that since the deposit was effectively a payment to HTRDC, the company became the owner of the principal amount. Therefore, by right of accession, HTRDC was also entitled to the interest earned on that amount.

The Supreme Court affirmed the Court of Appeals’ finding that the deposit constituted a constructive delivery to HTRDC. This meant that the funds were, in effect, already the property of HTRDC, entitling them to any interest accruing from the deposit. The Court highlighted that the TRB’s intention in making the deposit was to secure a writ of possession and proceed with the project, further supporting the notion of immediate payment.

The TRB’s argument that the expropriation account was in the name of the Department of Public Works and Highways (DPWH), not HTRDC, was also addressed. The Court clarified that the account’s name was not determinative of ownership. The DPWH was merely acting as a trustee, holding the funds for the benefit of the landowners whose properties were being expropriated. The Court of Appeals stated:

Notwithstanding that the amount was deposited under the DPWH account, ownership over the deposit transferred by operation of law to the [HTRDC] and whatever interest, considered as civil fruits, accruing to the amount of Php22,968,000.00 should properly pertain to [HTRDC] as the lawful owner of the principal amount deposited following the principle of accession.

The Court distinguished the case from National Power Corporation v. Angas and Land Bank of the Philippines v. Wycoco, which the TRB cited. Those cases involved interest as damages for delay in payment, whereas this case concerned interest earned by the deposited amount itself. The Court clarified that the right to interest in this case stemmed from the ownership of the principal amount, not from any delay in payment. This distinction is crucial in understanding the Court’s application of the principle of accession.

Furthermore, the Court clarified that the constructive delivery retroacted to the date of the deposit once HTRDC fulfilled the conditions set by the RTC. This meant that HTRDC was entitled to the interest from the moment the deposit was made, not just from the moment they were allowed to withdraw the funds. This interpretation reinforces the concept of immediate payment and its implications for ownership rights.

FAQs

What was the key issue in this case?	The central issue was whether the interest earned on a deposit made by the government for expropriation purposes belongs to the government or the landowner.
What is Republic Act No. 8974?	R.A. 8974 is a law that facilitates the acquisition of right-of-way, site, or location for national government infrastructure projects, requiring immediate payment to the property owner.
What does “constructive delivery” mean in this context?	Constructive delivery means that by depositing the money for expropriation, the government is considered to have effectively transferred ownership of the money to the landowner.
What is the principle of accession?	The principle of accession, under Article 440 of the Civil Code, states that ownership of property gives the right to everything produced by or incorporated to it.
Why was the expropriation account in the name of DPWH?	The DPWH acted as a trustee, holding the funds on behalf of the landowners whose properties were being expropriated for the North Luzon Expressway project.
How did this case differ from National Power Corporation v. Angas?	This case involved interest earned by the deposited amount itself, not interest as damages for delay in payment of just compensation as in National Power Corporation v. Angas.
What conditions did HTRDC have to meet to withdraw the deposit?	HTRDC had to show that the property was free from any lien or encumbrance and that it was the absolute owner of the property.
What was the effect of HTRDC meeting those conditions?	Once HTRDC met the conditions, the constructive delivery retroacted to the date of the initial deposit, entitling them to the interest from that date.
What was the amount that HTRDC was determined to be the owner of?	HTRDC was determined to be the owner of only a part of the amount deposited in the expropriation account, in the sum of P22,968,000.00, and hence, it is entitled by right of accession to the interest that had accrued to the said amount only.

This case clarifies the rights of property owners in expropriation cases, ensuring that they receive not only the value of their property but also any interest earned on deposits made by the government. This ruling provides a clearer understanding of the immediate payment requirement under Republic Act No. 8974 and its implications for ownership and accession.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Republic of the Philippines vs. Holy Trinity Realty Development Corp., G.R. No. 172410, April 14, 2008